Defects and Warranties

Defects & Warranties: Know Your Rights #

Understanding your rights around building defects and warranties is essential to protecting your new home—and your peace of mind. NSW law provides strong safeguards for homeowners, including clearly defined warranty periods and compensation schemes. Here’s what you need to know.

What Are Defects? #

Defects in building work are classified into two categories under NSW law: major defects and minor defects.

Major defects include issues that:

  • Make your home uninhabitable or unsafe
  • Threaten the structural integrity of the building
  • Could cause part or all of the building to collapse

These are typically defects in a major element of the building, which includes:

  • Load-bearing components like foundations, footings, floors, walls, roofs, columns, or beams
  • Fire safety systems
  • Waterproofing systems

These definitions are outlined in detail under Section 18E of the Home Building Act 1989 (NSW).

Minor defects, on the other hand, refer to cosmetic or non-structural issues—like paint blemishes, small cracks, or incomplete finishes. While they may not affect the safety or function of the home, they are still covered by warranty for a limited time.

Statutory Warranties Under the Home Building Act 1989 (NSW) #

Your builder is legally obligated to provide statutory warranties for their work:

  • 6 years for major defects
  • 2 years for all other (non-major) defects

These warranties:

  • Require all work to be performed with due care and skill
  • Apply even if you sell your home within the warranty period—they transfer to the new owner

NSW Home Building Compensation (HBC) Fund #

For residential projects over $20,000, builders must take out a Home Building Compensation Fund (HBCF) policy. This fund protects you if the builder cannot complete or rectify work due to:

  • Death
  • Disappearance
  • Insolvency
  • Licence suspension by the regulator

Coverage includes:

  • Up to $340,000 per claim
  • Deposit loss if work doesn’t commence (claimable within 12 months)
  • Up to 20% of contract value for incomplete work (claimable within 12 months of work stopping)
  • Major defects: repair costs (claimable within 6 years of completion)
  • Non-major defects: repair costs (claimable within 2 years)

Resolving Building Defects #

If you discover a defect, act quickly and follow these steps:

  1. Notify your builder in writing—email is ideal—and include clear photographs and descriptions
  2. Discuss possible resolutions—many builders will fix issues promptly
  3. If unresolved, lodge a Defect Notice via NSW Fair Trading
  4. Escalate to NCAT for disputes up to $500,000
  5. For larger or complex disputes, you may need to seek resolution through the courts

Tip: Keep a dated log of all defects and communications—this strengthens your case if you need to escalate.

Summary #

Knowing your rights around defects and warranties empowers you to act confidently if things go wrong. NSW provides clear definitions of major and minor defects, strong statutory warranties, and multiple avenues for compensation and dispute resolution.

Action List #

  1. Familiarise yourself with the definitions of major vs minor defects
  2. Review your contract for warranty and coverage details
  3. Ensure your builder provides a valid HBCF certificate
  4. Document all defects with photos, descriptions, and dates
  5. Notify the builder in writing as soon as defects are identified
  6. Escalate unresolved issues to Fair Trading or NCAT if needed
  7. Retain all records, emails, and inspection reports for future reference